Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/181657 
Year of Publication: 
2018
Series/Report no.: 
SAFE Working Paper No. 221
Publisher: 
Goethe University Frankfurt, SAFE - Sustainable Architecture for Finance in Europe, Frankfurt a. M.
Abstract: 
We propose a unified framework to measure the effects of different reforms of the pension system on retirement ages and macroeconomic indicators in the face of demographic change. A rich overlapping generations (OLG) model is built and endogenous retirement decisions are explicitly modeled within a public pension system. Heterogeneity with respect to consumption preferences, wage profiles, and survival rates is embedded in the model. Besides the expected direct effects of these reforms on the behavior of households, we observe that feedback effects do occur. Results suggest that individual retirement decisions are strongly influenced by numerous incentives produced by the pension system and macroeconomic variables, such as the statutory eligibility age, adjustment rates, the presence of a replacement rate, and interest rates. Those decisions, in turn, have several impacts on the macro-economy which can create feedback cycles working through equilibrium effects on interest rates and wages. Taken together, these reform scenarios have strong implications for the sustainability of pension systems. Because of the rich nature of our unified model framework, we are able to rank the reform proposals according to several individual and macroeconomic measures, thereby providing important support for policy recommendations on pension systems.
Subjects: 
population aging
pension reform
social security
life-cycle behavior
labor supply
retirement age
welfare
JEL: 
C68
D91
E17
H55
J11
J26
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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